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ETFs for Playing Internet Retailers

Shares of Internet retailers Amazon, Netflix and eBay could outperform those of other retailers, and three ETFs offer exposure to these Web giants.

NEW YORK (TheStreet) -- Despite declines in consumer confidence and a still unstable labor market, the stocks of three Internet retailers could perform well going forward.

Investors can gain exposure to these stocks through several exchange-traded funds (ETFs), which we'll discuss below.

The first promising Internet retailer is

Netflix

(NFLX) - Get Netflix, Inc. (NFLX) Report

. The Los Gatos, Calif.-based online movie rental company offers consumers a relatively cheap form of entertainment that can be streamed directly to a personal computer or television with the touch of a button.

Additionally, the company does not charge late fees or impose due dates on movies that are delivered via regular mail, enabling consumers to be flexible without being charged.

Third, the monthly subscription fees charged by Netflix are much lower than the cost of watching a movie at the movie theater or renting one from a local video store. Lastly, Netflix is trading above both its 50- and 200-day moving averages and is up nearly 104% year-to-date.

A second Internet retailer that is positioned relatively well is

Amazon

(AMZN) - Get Amazon.com, Inc. Report

. Recently, the company announced that it plans to start selling a new kind of e-book that comes embedded with both audio and video.

Additionally, Amazon plans to release a feature utilizing HTML 5 and CSS 3, the latest Web standards that are being used as an alternative to

Adobe's

(ADBE) - Get Adobe Inc. Report

Flash.

This will allow readers to view samples of books directly from a Web browser, further enhancing Amazon's "e-books everywhere" approach.

Previously, Amazon has required readers to send a sample section of a book to a device before it could be previewed.

Additionally, Amazon just released a free Kindle application for download on

Google

(GOOG) - Get Alphabet Inc. Class C Report

Android phones, extending Kindle's reach. Previously, this type of applicatin was available only on Blackberrys and iPhones.

The third retail retailer to watch is

eBay

(EBAY) - Get eBay Inc. Report

. The company, which offers an online forum for buying and selling merchandise, trades nearly $120,000 worth of goods every minute and boasts a user base north of 90 million.

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What's more, eBay has shown stable global e-commerce growth and recently announced with

Research In Motion

(RIMM)

, that a free application has been made available to Blackberry users in Australia, France, Germany, Italy, Spain, the U.K. and North America. The application will enable Blackberry users to bid, buy and check their eBay transactions and activity almost anywhere, further increasing convenience for the consumer.

In a nutshell, during times of economic hardship and uncertainty, consumers tend to favor the cheapest options, and the aforementioned Internet retailers make bargain shopping easier and more convenient.

Some ways to play all three of these retailers include the following ETFs:

Internet HOLDRs

(HHH)

, which allocates 39.94% of its assets to Amazon and 18.12% to eBay.

First Trust Dow Jones Internet Index

(FDN) - Get First Trust Dow Jones Internet Index Fund Report

, which allocates 6.89% of its assets to Amazon, 5.11% to eBay and 4.10% to Netflix.

PowerShares NASDAQ Internet

(PNQI) - Get Invesco NASDAQ Internet ETF Report

, which allocates 7.95% of its assets to Amazon, 6.98% to eBay and 4.8% to Netflix.

Although these Internet retailers are looking strong it is important to keep in mind that they are directly correlated with overall consumer spending and carry inherent risks. To help mitigate these risks, it's important to use an exit strategy that identifies when an upward trend in these equities could come to an end.

According to the latest data at

www.SmartStops.net

, the price points are as follows: NFLX at $107.06; AMZN at $102.55; EBAY at $19.03; HHH at $47.69; FDN at $23.48; PNQI at $24.74. These price points are reflective of market volatility and conditions and change on a daily basis.

-- Written by Kevin Grewal in Houston, Texas.

At the time of publication, Grewal had no positions in securities mentioned.

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Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.